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The Have’s and Have Nots – The gap is growing.

Wow, what an eye opener. I have just watched Nigel Latta: The new Have’s and Have Nots. What a powerful documentary about the changes in the New Zealand economy, the impact on families and the widening gap between the have’s and have nots.

I highly recommend that you watch the documentary, but if you can’t spare 44 minutes, then these are the key points that I picked up from it.

We have a new ‘class’ in New Zealand, The Working Poor. These are the families where both parents work full time, and still don’t have enough money to meet the day to day needs of their families.

If something goes wrong and they need to borrow money; say for car repairs or a family funeral that is out of town, they have no option but to borrow money. The banks won’t lend it to them, so they end up in the hands of the loan shops, who will happily lend them money at 10% interest. That didn’t sound too bad until it was clarified; that was 10% per week!! When you are desperate you tend to think in terms of immediate needs, and don’t calculate the longer term costs so the situation just keeps getting worse.

The statistics are scary. One in five families don’t have enough to live on. One in three families couldn’t survive more than two weeks if the main breadwinner lost their jobs. A staggering 55% would run out of money in four weeks.

The old adage of do well in school, get an education and you will get a good job, just doesn’t seem to apply any more. The average student loan debt for a graduate is $50,000, and the higher paying graduate positions that used to be there are thin on the ground. We have a generation of graduates in their 20’s loaded with debt before they even start their career.

The gap between the Have’s and Have Nots is widening, over the last 30 years the average wage for the lowest 10% has increased by 16%, those in the middle have seen an increase of 19% and those in the top 10% have seen an increase of 78%. The trickledown effect is in reality a trickle up effect.

So why has this happened? The experts are saying it is to do with Globalisation and technology. The first wave of globalisation moved manufacturing overseas to countries with lower wages, so the jobs just aren’t there. The next wave will impact those in the middle services like accounting and legal will shift offshore and into the cloud, we are beginning to see that already.

Over the last 10 years the level of debt has increased dramatically, and we aren’t just talking about public debt but private debt as well.

Professor Jane Kelsey from the University of Auckland put it like this. “We cannot continue with the pyramid economy built on debt. If people understood how indebted the NZ economy was they would be shocked. It isn’t public debt that is the issue, it is private. The banks have borrowed to on lend to us so we can buy houses, invest and to fill the gap between earnings and living costs” The Head of Treasury expresses the same concerns.

We know that the government earns income when individuals and businesses pay tax, IRD have identified $1.2 billion of tax unpaid, which is the tip of the ice berg Dr Lisa Marriot from Victoria University estimates it is closer to $5 – 6 billion, just think what the government could do with all that money for the health and education sector alone.

Tax avoidance is of course an international problem it is estimated that globally the multinationals (and we all know who they are) have fed $21 trillion into secret jurisdictions and virtually pay no tax at all.

These issues don’t just exist in New Zealand, they are a worldwide problem and it is too great for one person or one company to solve. But collectively if businesses start to think further ahead and don’t just focus on profit but on well-being change can occur. This is where the B Team, an organisation co-founded by Richard Branson whose mission is “to catalyse a better way of doing business for the well- being of people and the planet” come into it.

So what can we do as an individual or small business owner?

Learn to be financially responsible ourselves, not just in our businesses but in our private lives as well.

If you have employees, enable them to be financially responsible; pay them a living wage so they can support their families, educate them about debt and financial management.

If you have children teach them about how to save and appreciate the value of money

Pay your fair share of tax so the government can do what it is elected to do.

If we all just did a little bit, then the tide would start to turn.

Thanks Nigel and all the other experts who contributed the documentary, I hope it is the wake up call that we need.

If you want to learn more about our programmes that teach you to understand your money mindset and behaviours so you can make better choices and reach your goals, we would love to hear from you.